Now that Tax Day date has officially passed, I would like to recommend that you start thinking about personal finance and taxes for 2018. Seriously.
Here’s the basic idea. You have gathered all your financial information to finish your taxes. All that data is readily available. The information offers a 2017 baseline for reviewing your spending, your saving and your giving plans in 2018.
An additional advantage is taking the time for financial reflection in April lets you revisit your New Year’s resolutions. If you are like most people, at least several of those resolutions involved changing some aspect of how you deal with money. Paying down debts is traditionally a big one. So is adding to emergency savings. How are you doing with your resolutions? Should you tweak them or pare them down?
Even if you fall short on your financial resolutions, I think there is a bit of Ben Franklin in most of us. “Be always at war with your vices, at peace with your neighbors, and let each New Year find you a better man,” Franklin wrote. Revisiting your resolutions is a way of maintaining momentum to reaching key financial goals or develop a better money habit.
This year there is an additional reason for taking the time to go over your tax data again. Thanks to last year’s massive tax law overhaul, several big tax changes take effect this year. If you are self-employed, a business or an individual, you’ll want to understand how the new tax law will affect you and plan ahead.
For example, employees should check how much tax is being withheld. You probably expect you will get a tax cut since an estimated two-thirds of taxpayers should enjoy some reduction. Problem is, you could be among those that will face a higher tax bill next April 15. Since it’s better to be prepared than surprised, you can go to the IRS 2018 Withholding Calculator and see if you should adjust your withholding.
Another example: Freelancers, self-employed and other entrepreneurs with so-called pass through businesses like Limited Liability Company (LLC) and sole proprietorships should also familiarize themselves with the new tax law.
Pass-through income remains taxed at ordinary income rates, but many small business owners will be able to deduct 20 percent of “qualified business income” in 2018.
Problem is, figuring out who qualifies for the break and who doesn’t isn’t easy and, at the moment, a moving target. Still, it pays to familiarize yourself with the new rules.
Chris Farrell is senior economics contributor, “Marketplace,” commentator, Minnesota Public Radio.